Mexican Hass Avocado Importers Assoc. v. Preston/Tully Grp. Inc.

• Decision Date: 23 January 2012
• Docket Number: No. 09–CV–5522(JS)(WDW).,09–CV–5522(JS)(WDW).
• Citation: 838 F.Supp.2d 89
• Parties: MEXICAN HASS AVOCADO IMPORTERS ASSOC., Plaintiff, v. The PRESTON/TULLY GROUP INC., Defendant.
• Court: U.S. District Court — Eastern District of New York

838 F.Supp.2d 89

MEXICAN HASS AVOCADO IMPORTERS ASSOC., Plaintiff,

v.The PRESTON/TULLY GROUP INC., Defendant.

No. 09–CV–5522(JS)(WDW).

United States District Court, E.D. New York.

Jan. 23, 2012.

Anthony Filosa, Esq., David I. Rosenberg, Esq., Rosenberg, Fortuna & Laitman, LLP, City, NY, for Plaintiff.

E. Christopher Murray, Esq., Ruskin Moscou Faltischek, P.C., Uniondale, NY, for Defendant.

MEMORANDUM & ORDER

SEYBERT, District Judge:

Plaintiff Mexican Hass Avocado Importers Association (“MHAIA” or “Plaintiff”) commenced this diversity action on December 17, 2009 against Defendant Preston/Tully Group Inc. (“Preston/Tully” or “Defendant”) asserting claims for breach of contract, an accounting, and fraud. On June 20, 2011, Plaintiff moved for partial summary judgment as to liability on its breach of contract claim. On July 21, 2011, Defendant opposed and cross-moved for summary judgment on all claims. Presently pending before the Court are the parties' cross-motions. For the following reasons, Plaintiff's motion is DENIED, and Defendant's motion is GRANTED IN PART AND DENIED IN PART.

BACKGROUND¹

I. Factual Background

MHAIA was formed in 2003 by importers of Mexican Hass avocados to promote the sale of avocados of Mexican origin in the United States. Using assessments collected by the United States Department of Agriculture (“USDA”) pursuant to the Hass Avocado Promotion, Research and Information Act of 2000, 7 U.S.C. § 7801 et seq., MHAIA entered into a series of “Promotional Services Agreements,” with Preston/Tully whereby Preston/Tully agreed to develop and implement an integrated marketing campaign for Mexican Hass avocados. (Pl. Exs. K–N; Def. Exs. 1–5.)

The parties entered into the first Promotional Services Agreement in March 2004, which covered the period between March 2004 and December 2004 (Def. Ex. 1, “2004 Contract”), and the second in August 2004, which covered the period between August 2004 and December 2005 (Pl. Ex. K & Def. Ex. 2, “2004–2005 Contract”). The parties performed under these contracts without issue, and they are not the subject of this lawsuit. MHAIA subsequently entered into three additional one-year Promotional Services Agreements with Preston/Tully. The Court will discuss the details of each in turn.

A. 2005–2006 Contract

On or about October 1, 2005, the parties entered into a new Promotional Services Agreement covering the period between November 1, 2005 and October 31, 2006 (Pl. Ex. L & Def. Ex. 3, “2005–2006 Contract”). The 2005–2006 Contract, like the ones prior, was drafted in the form of a letter on Preston/Tully letterhead. The letter was from Christopher Tully, the President and sole owner of Preston/Tully, to Mr. E. Figueroa, the then-Chairman of the MHAIA Board, and was signed by both individuals. The letter set out to “outline [the parties'] understanding of the promotional campaign, and list the services [Preston/Tully] will provide, as well as the payment schedule for [those] services.” (2005–2006 Contract, at 1.) Pursuant to the terms of the agreement, Preston/Tully agreed to provide the following services:

— Development of marketing conceptual plan, communications strategy, brand positioning and its implementation[.]

— Website maintenance[.]

— Administrate co-op marketing fund used to reimburse importers for promotions executed with retailers and or [sic] in support of retailer activities.

— Reprint material used in point of sale program[.]

— Plan and purchase consumer advertising media in U.S. markets.

— Plan and purchase trade directed advertising.

— Conceive, develop, implement, track, administer [sic] public relations program.

— Provide campaign administration. follow-up and

( Id. at 2.) Those services are itemized in a “line item budget” attached to the letter ( id.) that was drafted by Mr. Tull ² ( see Tully Dep. 31–32).

The budget includes a list of nine items with short descriptions of the services to be provided and corresponding dollar amounts. They are as follows:

1. $700,000 for “POS/Demo/Importer fund,” which is described as “In-store demo fund used to reimburse importers for promotional efforts. Includes demo kit fulfillment and $100,000 for supervision, administration and monitoring of program by agency.”³ (emphasis added).

2. $106,000 for “POS material reprint,” which is described as “Reprint demo kit materials including recipe brochure, counter card, napkins, serving gloves, etc. Printing 1,000 kits English [sic]. Develop and design Hispanic POS kit. Print 1000 kits Spanish [sic].”

3. $550,000 for “Public Relations,” which is described as “P.R. activities directed at trade and consumer publications editors.”

4. $2,523,000 for “Radio Advertising,” which is described as “Media. Includes 15% Agency fee for planning and buying, verification and administration. Radio Spot production (two English and two Spanish commercials). Talent and distribution.” (emphasis added).

5. $176,000 for “Trade Advertising,” which is described as “Design and production of one 4/c trade advertisement. Production of films & proofs. Media placements in trade publications.”

6. $50,000 for “Misc. Production,” which is described as “Misc. campaign production expenses.”

7. $40,000 for “Website maintenance and updating,” which is described as “Maintenance trade website (English and Spanish) www. mexhass. com. Consumer website www. mexhassrecipes. com maintenance and refreshing.”

8. $330,000 for “Agency Administration,” which is described as “Development of strategy, program plan, execution and follow-up.”

9. $25,000 for “Agency Travel/Misc Expenses,” which is described as “Airfare, hotel, phone, fax, deliveries, misc. expenses, etc.”

( Id. at Attachment.) Preston/Tully may, but was not required to, subcontract specific items to outside parties. ( Id. at 4–5.) Additionally, Preston/Tully was obligated under the contract to “keep accurate records, books, and documents involving transactions relating to this agreement,” retain them for three years, and make them “available for inspection and audit by a representative of the Secretary of Agriculture” upon request. ( Id. at 4.) The agreement does not contain any additional information regarding the services to be provided by Preston/Tully.

The agreement states that “[t]he total amount covered ... is $4,500,000,” which is to be paid by MHAIA to Preston/Tully in installments. ( Id. at 3.) “If the campaign is cancelled for any reason whatsoever, Preston/Tully's entire fee for implementation, administration, and any other costs or fees incurred to date, shall, nevertheless, be deemed to have been earned and will be paid within ten (10) days of billing.” ( Id. at 5 (emphasis added).) The parties do not dispute that this constitutes the entire agreement between them.

All of the services provided for in the 2005–2006 Contract were adequately performed by either Preston/Tully or a third-party subcontractor. Nonetheless, MHAIA asserts that Preston/Tully breached the agreement by retaining whatever remained of the $4,500,000 budget after third-party fees and expenses were paid, rather than just $330,000 for Agency Administration, $100,000 for supervising, administering and monitoring the POS /Demo/ Importer fund program, and 15% of the value of the radio ads purchased—the fees specifically provided for in the agreement. Preston/Tully does not dispute that it retained the entire budget, but rather argues that it was entitled to do so under the terms of the contract.

B. 2006–2007 Contract

The parties entered into a new Promotional Services Agreement on or about September 14, 2006 covering the period between November 1, 2006 and October 31, 2007 (Pl. Ex. M & Def. Ex. 4, “2006–2007 Contract”). The substance of the 2006–2007 Contract was nearly identical to the substance of the 2005–2006 Contract with the exception of “[t]he total amount covered under th[e] agreement”—now $6,246,500 (2006–2007 Contract, at 3)—and the amounts allocated to and descriptions of certain line-items on the attached budget ( id. at Attachment). Five new items were added to the budget:

1. “NASCAR Sponsorship,” defined as “Consumer trade components of NASCAR sponsorship for races. Includes agency supervision.” (emphasis added).

2. “NASCAR Promotion,” defined as “Design, production and printing of P–O–S materials, sweepstakes, trade and consumer advertisement.”

3. “In–Store Advertising,” defined as “Design, production and placement of literature and dispensers for supermarkets.”

4. “Joint Consumer Promotion,” defined as “Joint promotion concept, tie-in, creative development, production, printing and coupon redemption.”

5. “TV Spot Creative Development,” defined as “Creative development of TV commercial to animatic stage.”

( Id.) Additionally, the description of the “Public Relations” services to be provided by Preston/Tully was modified to state, “Agency public relations/promotions activities directed at trade and consumer targets.” ( Id. (emphasis added).) The descriptions of all other line-items in the 2006–2007 budget were identical to their 2005–2006 counterparts, including $100,000 for supervision, administration and monitoring by the agency of the Importer Fund, a 15% agency fee for planning and buying radio advertising, and a flat fee ($440,000) for Agency Administration. ( Id.)

All of the services provided for in the 2006–2007 Contract were adequately performed by either Preston/Tully or a third-party subcontractor. But MHAIA again asserts that Preston/Tully breached the agreement by retaining whatever remained of the $6,246,500 budget after third-party fees and expenses were paid, rather than just $440,000 for Agency Administration, $100,000 for supervising, administering and monitoring the Importer fund program, and 15% of the value of the radio ads purchased. Preston/Tully again does not dispute that it retained the entire budget, but rather argues that it was entitled to it under the terms of the contract.

C. 2007–2008 Contract

On or about September 19,...